Does Right to Work Actually Lead to More Jobs?

Most people watching the Super Bowl last night probably had no idea that only a few days before, in the same city of Indianapolis, Governor Mitch Daniels signed a law that will cripple unions. As I've written before, Indiana is the first Rust Belt state to pass a right-to-work law, which prohibits both mandatory union membership and collecting fees from non-members. The news, however, has hardly gotten the attention the labor-minded might have expected. Blame it on the big game or the GOP presidential primary. Or blame it on the loss of union power that allowed the law to pass in the first place.

Whatever the reason, this lack of stories has meant little discussion of the actual impact of right-to-work legislation. Daniels, along with many proponents of such measures, argues that companies choose to locate in right-to-work states rather than in states with powerful unions. And the Indiana governor says he's already seeing the fruits of the newly passed law. Union advocates, meanwhile, say the laws decrease not only union power but also wages and workplace protections. According to conventional wisdom, it seems, the choice is between fewer good jobs and more cruddy jobs.

But according to Gordon Lafer, an economist at the University of Oregon's Labor Education and Research Center, that's a false choice. In fact, he says, there's no evidence that right-to-work laws have any positive impact on employment or bringing back manufacturing jobs.

While 23 states have right-to-work legislation, Lafer says that to adequately judge the law's impact in today's economy, you have to look at states that passed the law after the United States embraced the North American Free Trade Agreement (NAFTA) and free trade in general. "Anything before the impact of NAFTA started to be felt in the late '90s is meaningless in terms of what it can tell us," he says.

Because of free-trade agreements, companies can go to other countries and get their goods made for a fraction of the cost. Even in the most anti-union state in the country, there are still basic worker protections and a minimum-wage law to deal with. Such "roadblocks" to corporate profit can disappear if the business relocates overseas. "The wage difference that right to work makes ... is meaningless compared to the wage savings you can have leaving the country," Lafer says.

Only one state has passed right to work since NAFTA: Oklahoma in 2001. (Before that, the most recent was Idaho in 1985.) About a year ago, Lafer and economist Sylvia Allegretto published a report for the Economic Policy Institute* exploring just what had happened in the decade since Oklahomans got their "right to work." The results weren't pretty.

Rather than increasing job opportunities, the state saw companies relocate out of Oklahoma. In high-tech industries and those service industries "dependent on consumer spending in the local economy" the laws appear to have actually damaged growth. At the end of the decade, 50,000 fewer Oklahoma residents had jobs in manufacturing. Perhaps most damning, Lafer and Allegretto could find no evidence that the legislation had a positive impact on employment rates.

"It will not bring new jobs in, but it will result in less wages and benefits for everybody including non-union workers," says Lafer.

*Full disclosure: I was a writing fellow at the Economic Policy Institute in 2008.